This Agenda contains a brief general description of each item to be considered. Copies of the Staff reports or other written documentation relating to each item of business referred to on the Agenda are on file in the Office of the City Clerk and are available for public inspection. Any person who has a question concerning any of the agenda items may call the City Manager at (310) 603-0220, ext. 200.
Procedures for Addressing the Council
IN ORDER TO EXPEDITE CITY COUNCIL BUSINESS, WE ASK THAT ALL PERSONS WISHING TO ADDRESS THE
COUNCIL SUBMIT YOUR COMMENTS IN ADVANCE TO
[email protected]
OR FILL OUT A FORM
PROVIDED AT THE PODIUM, AND TO TURN IT IN TO THE CITY CLERK PRIOR TO THE START OF THE MEETING. FAILURE TO FILL OUT SUCH A FORM WILL PROHIBIT YOU FROM ADDRESSING THE COUNCIL IN THE ABSENCE OF THE UNANIMOUS CONSENT OF THE COUNCIL.
AGENDA
Lynwood Public Financing Authority
TO BE HELD ON
March 21, 2023
COUNCIL CHAMBERS - 11350 BULLIS RD. LYNWOOD, CA 90262 or Web conference via ZOOM - To participate via Zoom or by telephone: 1-669-900-9128 or 1-253-215-8782 Meeting ID: 835 2029 8238
Duly Posted on 3/17/23 by MQ
6:00 PM
1. CALL TO ORDER
2. CERTIFICATION OF AGENDA POSTING BY SECRETARY
3. ROLL CALL OF MEMBERS
Oscar Flores, President
Rita Soto
, Vice President
Gabriela Camacho, Member
Juan Munoz-Guevara
, Member
Jose Luis Solache, Member
4. GOVERNMENT CODE SECTION 54954.3
Members of the City Council are also members of Lynwood Public Financing Authority, which is concurrently convening with the City Council this evening and each Council Member is paid an Additional Stipend of $100 for Attending the Lynwood Public Financing Authority Meeting. Further, the Authority is scheduled to meet four (4) timer per year. If additional meetings are required beyond the scheduled four (4) meetings, the City Council will only get paid for the first four(4) meetings.
PUBLIC ORAL COMMUNICATIONS
(Regarding Agenda Items Only)
NON-AGENDA PUBLIC ORAL COMMUNICATIONS
Lynwood Public Financing Authority - Page 1 of 22
THIS PORTION PROVIDES AN OPPORTUNITY FOR THE PUBLIC TO ADDRESS THE LYNWOOD PUBLIC
FINANCING AUTHORITY ON ITEMS WITHIN THE JURISDICTION OF THE
LYNWOOD PUBLIC FINANCING
AUTHORITY
AND NOT LISTED ON THE AGENDA. IF AN ITEM IS NOT ON THE AGENDA, THERE SHOULD BE NO
SUBSTANTIAL DISCUSSION OF THE ISSUE BY
LYNWOOD PUBLIC FINANCING AUTHORITY
, BUT
LYNWOOD
PUBLIC FINANCING AUTHORITY
MAY REFER THE MATTER TO STAFF OR SCHEDULE SUBSTANTIVE
DISCUSSION FOR A FUTURE MEETING. (The Ralph M. Brown Act, Government Code Section 54954.2 (a).)
CONSENT CALENDAR
ALL MATTERS LISTED UNDER THE CONSENT CALENDAR WILL BE ACTED UPON BY ONE MOTION AFFIRMING THE ACTION RECOMMENDED ON THE AGENDA. THERE WILL BE NO SEPARATE DISCUSSION ON
THESE ITEMS PRIOR TO VOTING UNLESS MEMBERS OF THE COUNCIL OR STAFF REQUEST SPECIFIC ITEMS TO BE REMOVED FROM THE CONSENT CALENDAR FOR SEPARATE ACTION.
5. PREVIOUS MEETING MINUTES
Comments:
Approving previous meeting minutes for the Lynwood Public Financing Authority (CC)
November 1, 2022 Regular Lynwood Public Financing Authority Meeting December 20, 2022 Regular Lynwood Public Financing Authority Meeting January 17, 2023 Regular Lynwood Public Financing Authority Meeting March 7, 2023 Regular Lynwood Public Financing Authority Meeting
Recommendation:
Staff recommends that the Lynwood Public Financing Authority approve the following minutes:
November 1, 2022 Regular Lynwood Public Financing Authority Meeting December 20, 2022 Regular Lynwood Public Financing Authority Meeting January 17, 2023 Regular Lynwood Public Financing Authority Meeting March 7, 2023 Regular Public Financing Authority Meeting
6. TREASURER'S MONTHLY INVESTMENT REPORT
Comments:
The purpose of this item is to have the Honorable President and Members of the Public Finance Authority review the Treasurer’s Monthly Investment Report as required by State Statutes. (CT)
Recommendation:
The following is the Investment Report for the month ending February 28, 2023. This report is provided to ensure City Council is informed of the Department’s investment activities. The report satisfies the recommended reporting requirements of the City of Lynwood, which addresses the City Council’s request for monthly financial information.
It is recommended that the City Council for the City of Lynwood receive and file the attached Monthly Investment Report.
ADJOURNMENT
THE LYNWOOD PUBLIC FINANCE AUTHORITY MEETINGS WILL BE POSTED AS NEEDED. THE NEXT MEETING WILL BE HELD IN THE COUNCIL CHAMBERS OF CITY HALL ANNEX, 11350 BULLIS ROAD, CITY OF LYNWOOD, CALIFORNIA.
Lynwood Public Financing Authority - Page 2 of 22
Agenda Item # 5.
AGENDA STAFF REPORT
DATE:
March 21, 2023
TO:
Honorable Mayor and Members of the City Council
APPROVED BY:
Ernie Hernandez, City Manager
PREPARED BY:
Maria Quinonez, City Clerk
Silvia Pineda, Assistant to the City Clerk
Nancy Blinzler, Office Assistant
SUBJECT:
PREVIOUS MEETING MINUTES
Recommendation:
Staff recommends that the Lynwood Public Financing Authority approve the following minutes:
November 1, 2022 Regular Lynwood Public Financing Authority Meeting December 20, 2022 Regular Lynwood Public Financing Authority Meeting January 17, 2023 Regular Lynwood Public Financing Authority Meeting March 7, 2023 Regular Public Financing Authority Meeting
Background:
N/A
Discussion and Analysis:
N/A
Fiscal Impact:
N/A
Coordinated With:
N/A
Lynwood Public Financing Authority - Page 3 of 22 Agenda Item # 2 ATTACHMENTS:
Description
Lynwood Public Financing Authority Regular Meeting 11/01/22 Lynwood Public Financing Authority Regular Meeting 12/20/22 Lynwood Public Financing Authority Regular Meeting 01/17/23 Lynwood Public Financing Authority Regular Meeting 03/07/23 Lynwood Public Financing Authority - Page 4 of 22 Agenda Item # 2 1 Lynwood Public Financing Authority Meeting
Meeting Minutes
November 1, 2022
01. CALL TO ORDER
The Lynwood Public Financing Authority Meeting of the City of Lynwood met in the Council Chambers, 11350 Bullis Road Lynwood, CA 90262 or Web conference via ZOOM - To participate via Zoom or by telephone: 1 -669-900-9128 or 1-253-215- 8782 Meeting ID: 835 2029 8238 on the above date at 6:00 p.m.
Meeting called to order at 6:20 p.m.
President Casanova presiding.
02. CERTIFICATION OF AGENDA POSTING BY SECRETARY
Secretary Quiňonez announced the Agenda had been duly posted in accordance with the Brown Act.
03. ROLL CALL OF MEMBERS
PRESENT: MEMBERS FLORES, SANTANA, SOTO, VICE PRESIDENT
SOLACHE AND PRESIDENT CASANOVA
ABSENT: NONE
STAFF PRESENT:
Chief Administrative Officer Hernandez, City Attorney Tapia, City Treasurer Camacho, Secretary Quiňonez.
04. GOVERNMENT CODE SECTION 54954.3
Secretary Quiňonez stated the following:
Members of the City Council are also members of the Lynwood Public Financing Authority, which is concurrently convening with the City Council this evening and each Member is paid an additional stipend of $100 for attending the Lynwood Public Financing Authority Meeting. Further, the Authority is scheduled to meet four (4) times per year. If additional meetings are required beyond the scheduled four (4) meetings, the City Council will only get paid for the first four (4) meetings.
PUBLIC ORAL COMMENT
(Regarding Agenda Items Only)
NONE
NON-AGENDA PUBLIC ORAL COMMUNICATIONS
NONE
Lynwood Public Financing Authority - Page 5 of 22 Agenda Item # 2 2 CONSENT CALENDAR
All matters listed under the Consent Calendar will be acted upon by one motion affirming the action recommended on the agenda. There will be no separate discussion on these items prior to voting unless members of the Council or staff request specific items be removed from the Consent Calendar for separate action.
MOTION: It was moved by Vice President Solache, seconded by Member Santana to approve the consent calendar. Motion carried by 5/0 vote.
ROLL CALL:
AYES: MEMBERS FLORES, SANTANA, SOTO, VICE PRESIDENT
SOLACHE AND PRESIDENT CASANOVA
NOES: NONE
ABSTAIN: NONE
ABSENT: NONE
05. TREASURER'S QUARATERLY REPORT
Received and Filed TREASURER'S QUARTERLY REPORT
ADJOURNMENT
Having no further discussion, it was moved by Member Santana, seconded by Member Flores to adjourn the Lynwood Public Financing Authority meeting at 6:22 p.m.
____________________ ______________________
Maria Quiňonez, Secretary Jorge Casanova, President
/nb
Lynwood Public Financing Authority - Page 6 of 22 Agenda Item # 2 1 Lynwood Public Financing Authority Meeting
Meeting Minutes
December 20, 2022
01. CALL TO ORDER
The Lynwood Public Financing Authority Meeting of the City of Lynwood met in the Council Chambers, 11350 Bullis Road Lynwood, CA 90262 or Web conference via ZOOM - To participate via Zoom or by telephone: 1-669-900-9128 or 1-253-215-8782 Meeting ID: 835 2029 8238 on the above date at 6:00 p.m.
Meeting called to order at 6:12 p.m.
President Flores presiding.
02. CERTIFICATION OF AGENDA POSTING BY SECRETARY
Secretary Quiňonez announced the Agenda had been duly posted in accordance with the Brown Act.
03. ROLL CALL OF MEMBERS
PRESENT: MEMBERS CAMACHO, MUNOZ-GUEVARA, SOLACHE, VICE
PRESIDENT SOTO AND PRESIDENT FLORES
ABSENT: NONE
STAFF PRESENT:
Chief Administrative Officer Hernandez, City Attorney Tapia and Secretary Quiňonez.
04. GOVERNMENT CODE SECTION 54954.3
Secretary Quiňonez stated the following:
Members of the City Council are also members of the Lynwood Public Financing Authority, which is concurrently convening with the City Council this evening and each Member is paid an additional stipend of $100 for attending the Lynwood Public Financing Authority Meeting. Further, the Authority is scheduled to meet four (4) times per year. If additional meetings are required beyond the scheduled four (4) meetings, the City Council will only get paid for the first four (4) meetings.
PUBLIC ORAL COMMENT
(Regarding Agenda Items Only)
NONE
Lynwood Public Financing Authority - Page 7 of 22 Agenda Item # 2 2 NON-AGENDA PUBLIC ORAL COMMUNICATIONS
NONE
CONSENT CALENDAR
All matters listed under the Consent Calendar will be acted upon by one motion affirming the action recommended on the agenda. There will be no separate discussion on these items prior to voting unless members of the Council or staff request specific items be removed from the Consent Calendar for separate action.
MOTION: It was moved by Member Solache, seconded by Vice President Soto to approve the consent calendar. Motion carried by 5-0 vote.
ROLL CALL:
AYES: MEMBERS CAMACHO, MUNOZ-GUEVARA, SOLACHE, VICE
PRESIDENT SOTO AND PRESIDENT FLORES
NOES: NONE
ABSTAIN: NONE
ABSENT: NONE
05. TREASURER’S MONTHLY INVESTMENT REPORT
Received and Filed TREASURER’S MONTHLY INVESTMENT REPORT
ADJOURNMENT
Having no further discussion, it was moved by Council Member Munoz-Guevara, seconded by Vice President Soto to adjourn the Lynwood Public Financing Authority meeting at 6:14 p.m. Motion carried by unanimous consent.
____________________ ______________________
Maria Quiňonez, Secretary Oscar Flores, President
/sp
Lynwood Public Financing Authority - Page 8 of 22 Agenda Item # 2 1 Lynwood Public Financing Authority Meeting
Meeting Minutes
January 17, 2023
01. CALL TO ORDER
The Lynwood Public Financing Authority Meeting of the City of Lynwood met in the Council Chambers, 11350 Bullis Road Lynwood, CA 90262 or Web conference via ZOOM - To participate via Zoom or by telephone: 1 -669-9009128 or 1 -253-215- 8782 Meeting ID: 835 2029 8238 on the above date at 6:00 p.m.
Meeting called to order at 6:17 p.m.
President Flores presiding.
02. CERTIFICATION OF AGENDA POSTING BY SECRETARY
Secretary Quiňonez announced the Agenda had been duly posted in accordance with the Brown Act.
03. ROLL CALL OF MEMBERS
PRESENT: MEMBER CAMACHO, MUNOZ-GUEVARA, SOLACHE, VICE
PRESIDENT SOTO AND PRESIDENT FLORES
ABSENT: NONE
STAFF CHIEF ADMINISTRATIVE OFFICER HERNANDEZ, CITY
ATTORNEY TAPIA, DEPUTY CITY TREASURER HARDING AND
SECRETARY QUINONEZ
04. GOVERNMENT CODE SECTION 54954.3
Secretary Quiňonez stated the following:
Members of the City Council are also members of the Lynwood Public Financing Authority, which is concurrently convening with the City Council this evening and each Member is paid an additional stipend of $100 for attending the Lynwood Public Financing Authority Meeting. Further, the Authority is scheduled to meet four (4 ) times per year. If additional meetings are required beyond the scheduled four (4) meetings, the City Council will only be paid for the first four (4) meetings.
PUBLIC ORAL COMMENT
(Regarding Agenda Items Only)
NONE
NON-AGENDA PUBLIC ORAL COMMUNICATIONS
NONE
Lynwood Public Financing Authority - Page 9 of 22 Agenda Item # 2 2 Consent Calendar
All matters listed under the Consent Calendar will be acted upon by one motion affirming the action recommended on the agenda. There will be no separate discussion on these items prior to voting unless members of the Council or staff request specific items be removed from the Consent Calendar for separate action.
City Manager Hernandez requested item number five (5) be continued to the next meeting.
MOTION: It was moved by Member Camacho, seconded by Vice President Soto to continue item number five (5) to the next meeting . Motion carried by the following 5/0 vote:
ROLL CALL:
AYES: MEMBERS CAMACHO, MUNOZ-GUEVERA, SOLACHE, VICE
PRESIDENT SOTO AND PRESIDENT FLORES
NOES: NONE
ABSTAIN: NONE
ABSENT: NONE
05. TREASURER'S MONTHLY INVESTMENT REPORT
Continued to the next meeting
ADJOURNMENT
Having no further discussion, it was moved by Member Solache , seconded by Vice President Soto to adjourn the Lynwood Public Financing Authority meeting at 6:19 p.m.
Maria Quiňonez, Secretary Oscar Flores, President
/nb
Lynwood Public Financing Authority - Page 10 of 22 Agenda Item # 2 1 Lynwood Public Financing Authority Meeting
Meeting Minutes
March 7, 2023
01. CALL TO ORDER
The Lynwood Public Financing Authority Meeting of the City of Lynwood met in the Council Chambers, 11350 Bullis Road Lynwood, CA 90262 or Web conference via ZOOM - To participate via Zoom or by telephone: 1 -669-9009128 or 1 -253-215- 8782 Meeting ID: 835 2029 8238 on the above date at 6:00 p.m.
Meeting called to order at 6:18 p.m.
President Flores presiding.
02. CERTIFICATION OF AGENDA POSTING BY SECRETARY
Silvia Pineda, Assistant to Secretary Quiňonez announced the Agenda had been duly posted in accordance with the Brown Act.
03. ROLL CALL OF MEMBERS
PRESENT: MEMBER CAMACHO, MUNOZ-GUEVARA, SOLACHE, VICE
PRESIDENT SOTO AND PRESIDENT FLORES
ABSENT: NONE
STAFF CHIEF ADMINISTRATIVE OFFICER HERNANDEZ AND CITY
ATTORNEY TAPIA
ABSENT: CITY TREASURER CUELLER AND SECRETARY QUINONEZ
04. GOVERNMENT CODE SECTION 54954.3
Silvia Pineda, Assistant to Secretary Quiňonez stated the following:
Members of the City Council are also m embers of the Lynwood Public Financing Authority, which is concurrently convening with the City Council this evening and each Member is paid an additional stipend of $100 for attending the Lynwood Public Financing Authority Meeting. Further, the Authority is scheduled to meet four (4) times per year. If additional meetings are required beyond the scheduled four (4) meetings, the City Council will only be paid for the first four (4) meetings.
PUBLIC ORAL COMMENT
(Regarding Agenda Items Only)
NONE
NON-AGENDA PUBLIC ORAL COMMUNICATIONS
NONE
Lynwood Public Financing Authority - Page 11 of 22 Agenda Item # 2 2 Consent Calendar
All matters listed under the Consent Calendar will be acted upon by one motion affirming the action recommended on the agenda. There will be no separate discussion on these items prior t o voting unless members of the Council or staff request specific items be removed from the Consent Calendar for separate action.
MOTION: It was moved by Member Camacho, seconded by Member Solache to approve the consent calendar. Motion carried by the following 5/0 vote:
ROLL CALL:
AYES: MEMBERS CAMACHO, MUNOZ-GUEVERA, SOLACHE, VICE
PRESIDENT SOTO AND PRESIDENT FLORES
NOES: NONE
ABSTAIN: NONE
ABSENT: NONE
05. PREVIOUS MEETING MINUTES
Approved Meeting Minutes for the Lynwood Public Financing Authority November 15, 2022 and February 21,
2023 Regular Meeting
ADJOURNMENT
Having no further discussion, it was moved by Vice President Soto, seconded by Member Camacho to adjourn the Lynwood Public Financing Authority meeting at 6:20 p.m.
Maria Quiňonez, Secretary Oscar Flores, President
/nb
Lynwood Public Financing Authority - Page 12 of 22 Agenda Item # 2 Agenda Item # 6.
AGENDA STAFF REPORT
DATE:
March 21, 2023
TO:
Honorable President and Members of the Public Finance Authority
APPROVED BY:
Ernie Hernandez, City Manager
PREPARED BY:
Luis Cuellar, City Treasurer
Sheila Harding, Deputy City Treasurer
SUBJECT:
TREASURER'S MONTHLY INVESTMENT REPORT
Recommendation:
The following is the Investment Report for the month ending February 28, 2023. This report is provided to ensure City Council is informed of the Department’s investment activities. The report satisfies the recommended reporting requirements of the City of Lynwood, which addresses the City Council’s request for monthly financial information.
It is recommended that the City Council for the City of Lynwood receive and file the attached Monthly Investment Report.
Background:
Government Code Section 53607, last amended 1996, with reference to the reporting of investment transactions states that the Treasurer
shall
make a monthly report of those transaction to the legislative body. Government Code Section 53646 (b) (1), last amended 2004, with reference to discussion related to establishment of an Investment Policy and investment reporting states that “the Treasurer may render a quarterly report”. To determine the applicable code inasmuch as reference to Government Code Section 53607 or non-compliance thereof has never been included in past audit findings. While Government Code Section 53646 (b) (1) which is the most current version related to Investment Reporting utilizes the word “may” indicating the reporting mechanism is optional, to err on the side of caution, and in order to ensure that we are in compliance with all Government Codes, a new procedure of submitting monthly reports to the Council/Agency agenda was implemented. Attached for Council/Agency review is the City’s/Agency’s Monthly Treasurer’s Report.
Discussion and Analysis:
The investment transactions were executed in accordance with the City's Investment Policy and the California State Government Code Section 5346(b)(3) that requires the general fund is able to meet its expenditure requirements for the next six months.
Lynwood Public Financing Authority - Page 13 of 22 Agenda Item # 3
Fiscal Impact:
The action recommended in this report will not have a fiscal impact on the City.
Coordinated With:
FHN Financial Main Street Advisors currently monitors the City’s investment activities.
ATTACHMENTS:
Description
ACTIVITY & PERFORMANCE SUMMARY - FEBRUARY 2023
FHN MONTH IN REVIEW REPORT- FEBRUARY 2023
CNBC ECONOMIC REPORT - FEBRUARY 2023
Lynwood Public Financing Authority - Page 14 of 22 Agenda Item # 3
ACTIVITY & PERFORMANCE SUMMARY
FEBRUARY 2023
1 The following is the City’s cash flow and the monthly investment report. The monthly report includes a summary of the City’s investment portfolio, a monthly review of the investment market as prepared by the investment managers and detailed informati on on monthly transactions, cash flows and investments by issuer.
FHN Investment Advisors manage the portion of investments not invested by LAIF (State Local Agency Investment Fund). All of the City’s rated investments were rated “A” or higher by at least tw o rating agencies on February 2023. The City’s investments comply with its current investment policy, which emphasizes the safety, liquidity, and return of its investments, allowing the city to meet its expenditures for the next six months.
The tables below provide key statistics regarding the City’s cash flow and investment portfolio as of February 28, 2023.
Type Balances Held
Cash - US Bank $57,543,118.38
Cash - JPMorgan Chase Bank $8,192,918.66
Local Agency Investment Fund $9,645,805.63
FHN Investment Advisors/BNY $25,833,201.20
TOTAL $101,215,043.87
FHN ACCOUNT SUMMARY
` 28-Feb 31-Jan
Market Value $35,479,007 $35,581,041
Book Value $$36,718,168 $36,579,546
Variance (1,239,161) (998,505)
Par Value $36,786,688 $36,591,950
Net Asset Value $96.63 $97.27
Book Yield 2.56% 2.47%
Market Yield 3.88% 3.90%
Years to Maturity 1.54 1.62
Effective Duration 1.39 1.35
PORTFOLIO SUMMARY
Market Book % of
Investments Par Value Value Value Portfolio
Certificate of Deposits 4,421,000.00 4,209,148.04 4,419,769.18 12.04% Commercial Paper 500,000.00 491,544.00 491,923.82 1.34% Corporate Bonds 3,500,000.00 3,364,930.00 3,489,164.65 9.50% LAIF 9,645,805.63 9,645,805.63 9,645,805.63 26.27%
Money Market Funds 2,779,881.97 2,779,881.97 2,779,881.97 7.57% US Agencies 9,440,000.00 8,983,282.20 9,392,941.71 25.58% U.S. Treasuries 6,500,000.00 6,004,415.00 6,498,680.73 17.70% 36,786,687.60 35,479,006.84 36,718,167.69 100.00%
Lynwood Public Financing Authority - Page 15 of 22 Agenda Item # 3
ACTIVITY & PERFORMANCE SUMMARY
FEBRUARY 2023
2 INVESTMENT POLICY COMPLIANCE
% %
Company Book Value of
Portfolio
Allowed by
Policy
US Treasuries 6,498,680.73 17.70% 100%
US Federal Agencies 9,392,941.71 25.58% 100%
Supranational Obligations $0.00 0% 30%
LAIF 9,645,805.63 26.27% 75%
Commercial Paper 491,923.82 1.34% 25%
Money Market Funds 2,779,881.97 7.57% 20%
Negotiable Certificates of Deposit 4,419,769.18 12.04% 30% Corporate Obligations 3,489,164.65 9.50% 30%
State and Local Governments $0.00 0% 100%
Total 36,718,167.69 100.00%
FHN INCOME EARNED SUMMARY
February FY to Date Month End
INTEREST
Interest Received/Purchased. 126,007.42 409,627.33
Plus Accrued Interest at End of Period 96,856.15 96,856.15 Less Accrued Interest at Beginning of Period -173,307.07 -74,680.06 Interest Earned During Period 49,556.50 431,803.42
Total Adjustments for Amortization/Accretion 5,544.68 37,250.76 Total Capital Gains or Losses 0 0
Total Earnings During Period 55,101.18 469,054.18
PURCHASES & MATURITIES
22-
Jul
22-
Aug
22-
Sep
22-
Oct
22-
Nov
22-
Dec
23-
Jan
28-
Feb
Purchases 3 14 1 2 1 0 0 1
Redemptions 1 2 0 1 1 0 2 4
Total 4 16 1 3 2 0 2 5
Lynwood Public Financing Authority - Page 16 of 22 Agenda Item # 3 Disclaimer is on the last page of this report.
MARCH 2, 2023
Tightening Expectations Move Upward
Accelerating inflation and signs of an overheating economy in February reinvigorated Fed tightening expectations. The labor market is historically tight, reaching a 60-year low unemployment rate in January and adding 517k jobs. Consumer spending shows further resilience despite rising interest rates and elevated inflation. Extra noise from January seasonal adjustments and bad December weather complicate understanding actual economic strength, but for now the Fed believes it can keep raising rates to fight inflation without causing significant economic pain.
The debt ceiling issue lingers, with the latest “X-date” estimates sometime this summer. One year into Russia’s invasion of Ukraine, food and energy commodities have stabilized, but potential escalation poses global economic risks. Markets now price in a terminal rate above 5.5% after expectations for 5% as recently as January. The S&P 500 fell 2.6% on the month and the 10-year UST yield rose 41bp.
Core services ex-shelter, the Fed’s latest preferred inflation measure, is increasing too quickly and showing little evidence of slowing down. This “supercore” is meant to measure underlying inflation once noisier inflation from supply chain disruptions and volatile energy prices stabilize.
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
PCE Core Services ex-shelter
Supercore ticked up in Jan; but not enough to lift the 3-mo avg Core Serv ex Housing
3 per. Mov. Avg. (Core Serv ex Housing)
Source: Bureau of Economic Analysis and FHN Financial
4.70%
4.80%
4.90%
5.00%
5.10%
5.20%
5.30%
5.40%
Dec 01 Dec 16 Dec 31 Jan 15 Jan 30 Feb 14 Mar 01
Rising July Fed Funds Expectations
Based on fed funds futures contracts for July 2023
Source: Chicago Board of Trade, FHN Financial
Market expectations for the July average fed funds rate — after the June meeting — rose significantly throughout February. The strong January employment report started the upward trend before two hot inflation reports validated Fed communication that rates would have to continue higher.
3.0%
5.0%
7.0%
9.0%
11.0%
13.0%
15.0%
1990 1994 1998 2002 2006 2010 2014 2018 2022
Unemployment Rate Fell to 1967 Low
Source: Bureau of Labor Statistics
Inflation-adjusted retail sales climbed 2.4% in January following two weak months. January data are particulary susceptible to seasonal adjustment quirks, meaning February and March could revert to a cooler trend.
Nonetheless, enough economic indicators are suggesting robust economic growth, eclipsing any potential Fed concerns it has overtightened.
The January unemployment rate fell to its lowest since 1967, underscoring labor market tightness the Fed believes elevates wage pressures that get passed on to higher consumer prices. After nearly a year of Fed tightening, the labor market is showing no meaningful signs of cooling. -1.0%
-0.5%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
Jan '22 Mar '22 May '22 Jul '22 Sep '22 Nov '22 Jan '23 Real Retail Sales
Component-Specific Deflators, Monthly Changes
Source: Census Bureau, Bureau of Labor Statistics, FHN Financial MONTH IN REVIEW: FEBRUARY 2023
ECONOMICS
Chris Low
Chief Economist
212.418.7909
[email protected]
Sophia Kearney-Lederman
Senior Economist
212.418.7966
[email protected]
Will Compernolle
Macro Strategist
212.418.5056
[email protected]
Lynwood Public Financing Authority - Page 17 of 22 Agenda Item # 3
MONTH IN REVIEW | FEBRUARY 2023
Market-Moving Events: 10-Year Treasury
3.30%
3.40%
3.50%
3.60%
3.70%
3.80%
3.90%
4.00%
1-Feb 8-Feb 15-Feb 22-Feb
10-Year Yield
February 2023
Legend
Yield up
Daily high
Close
Open
Daily Low
Yield down
Daily high
Open
Close
Daily Low
2/10: Russia announces
500k bpd oil production
cut in March
2/15: Jan Retail Sales
surge 3.0%
2/14: Jan CPI +0.5%
m/m; Core +0.4%
2/1: Fed hikes 25bp,
Powell dismisses
divergence btw Fed
and markets
2/28: Supreme Court
appears poised to overturn
student loan forgiveness
2/3: Payrolls +517k;
unemp. rate drops to
60-year low 3.4%
2/7: Powell says
further rate increases
are needed
2/23: Q4 GDP revisions
suggest weak underlying
growth
2/21: Preliminary PMIs
surprise to the upside
Lynwood Public Financing Authority - Page 18 of 22 Agenda Item # 3
MONTH IN REVIEW | FEBRUARY 2023
Market-Moving Events: S&P 500
3900
3950
4000
4050
4100
4150
4200
1-Feb 8-Feb 15-Feb 22-Feb
S&P 500
February 2023
LegendRally
Daily high
Close
Open
Daily Low
Selloff
Daily high
Open
Close
Daily Low
2/9: Fed's Barkin
emphasizes need to
keep raising rates
2/3: Fed's Daly says
strong employment
report could mean more
rate hikes
2/1: Fed hikes 25bp,
markets interpret Powell's
weak pushback against
optimists as dovish
2/21: Walmart, Home Depot
report weak forecasts
2/13: WTI falls below $80
as Biden admin
announces more SPR
selling
2/16: Bullard and
Mester say they
favored 50bp Feb hike
2/23: Netflix, Dominos fall
on deteriorating outlook
Lynwood Public Financing Authority - Page 19 of 22 Agenda Item # 3
MONTH IN REVIEW | FEBRUARY 2023
Air travel is approaching pre-pandemic levels as Covid risks fade from public consciousness, according to TSA traveler checkpoint data. But sustained increases in remote work have halved New York City subway ridership compared with February 2020.
Light vehicle sales surged in January before a slight February dip, but domestic auto production has been on a steady downward trend since August last year.
Lower future production will elevate auto prices and lead to less disinflation than is currently priced in to market expectations.
Spreads between FX-hedged 5-year Treasury yields and 5-year Bund yields widened through 2022 as energy shortage worries rattled European inflation expectations.
Once the winter passed and the ECB kept pace with Fed tightening, spreads narrowed.
Months of encouraging inflation data in Q4 2022 initially drove hopes for an impending conclusion to the Fed tightening cycle. But, after seasonal adjustment revisions, CPI inflation was comparatively higher in the second half of 2022, dashing hopes that an end to Fed tightening was in sight.
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2013-2014 2016-2017 2019-2020 2022-2023
Fluctuating Heating Degree Days
Index measuring heating intensity needed, deviation from 2000-2023 trend December January
Source: National Oceanic and Atmospheric Administration, FHN Financial 20 30
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80 Jan '22 May '22 Sep '22 Jan '23
5-Year Treasury Yields and 5-Year Bund Yields
Spread hedged from dollars into euros, basis points
Source: Bloomberg, FHN Financial
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Auto Sales Rebounding, Production Struggles
Light Vehicle Sales, SAAR, millions (right)
Domestic Auto Production, Thousands (left)
Source: Ward's Automotive Group, Bureau of Economic Analysis 250k
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2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 New & Existing Home Sales
Seasonally Adjusted Annualized Pace
Existing home sales (left)
New home sales (right)
Source: Census Bureau, Nat'l Association of Realtors
An unusually warm January 2023 followed an unusually cold December 2022, contributing to January rebounds across diverse sets of economic data. These months’ deviation from the 2000-2023 trend for Heating Degree Days, an index from the NOAA measuring population-adjusted heating intensity needed, were the opposite of the same two months the previous winter While rising mortgage rates and elevated home prices have discouraged housing demand, low-rate mortgages from early-pandemic have frozen would-be sellers and cratered housing inventories. Existing home sales have fallen below May 2020 cycle lows while new home sales have fallen close to the peak of the last cycle.
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Data Watch: Key Economic Indicators
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Feb '19 Feb '20 Feb '21 Feb '22 Feb '23
Pre-Pandemic Travel Returns, NYC Commutes Do Not
Thousands, 30-day trailing averages
MTA Turnstile Entries (right)
TSA Checkpoints (left)
Source: Metropolitan Transit Authority, Transportation Security Administration, FHN Financial -0.2%
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New Seasonal Adjustments Tweak CPI Narrative
Monthly Changes, Consumer Price Index
Prior Revised
Source: Bureau of Labor Statistics, Bloomberg
Lynwood Public Financing Authority - Page 20 of 22 Agenda Item # 3
CNBC February Economic Report
KEY POINTS
Nonfarm payrolls rose by 311,000 in February, above the 225,000 Dow Jones estimate. The unemployment rate increased to 3.6%, above expectations. Average hourly earnings climbed 4.6% from a year ago, less than expected, in a positive sign for inflation.
Leisure and hospitality, retail, and government led job creation by sector.
Job creation decelerated in February but was still stronger than expected despite the Federal Reserve’s efforts to slow the economy and bring down inflation.
Nonfarm payrolls rose by 311,000 for the month, the Labor Department reported Friday. That was above the 225,000 Dow Jones estimate and a sign that the employment market is still hot.
The unemployment rate rose to 3.6%, above the expectation for 3.4%, amid a tick higher in the labor force participation rate to 62.5%, its highest level since March 2020.
The survey of households, which the Bureau of Labor Statistics uses to compute the unemployment rate, showed a smaller 177,000 increase. A more encompassing unemployment measure that includes discouraged workers and those holding part - time jobs for economic reasons rose to 6.8%, an increase of 0.2 percentage point.
There also was some good news on t he inflation side, as average hourly earnings climbed 4.6% from a year ago, below the estimate for 4.8%. The monthly increase of
0.2% also was below the 0.4% estimate.
Though the jobs number was stronger than expectations, February’s growth represented a deceleration from an unusually strong January. The year opened with a nonfarm payrolls gain of 504,000, a total that was revised down only slightly from the initially reported 517,000. December’s total also was taken down slightly, to 239,000, a decrease of 21,000 from the previous estimate.
Stocks were mixed after the release, while Treasury yields were mostly lower.
The jobs report likely keeps the Fed on track on raise interest rates when it meets again March 21 -22. But traders priced in less of a chance that the central bank will accelerate to a 0.5 percentage point increase, dropping the likelihood to 48.4%, or about a coin flip, according to a CME Group estimate.
Lynwood Public Financing Authority - Page 21 of 22 Agenda Item # 3
CNBC February Economic Report
Leisure and hospitality led employment gains, with an increase of 105,000, about in line with the six-month average of 91,000. Retail saw a gain of 50,000. Government added 46,000, and professional and business services saw an increase of 45,000.
But information-related jobs declined 25,000, while transportation and warehousing lost 22,000 jobs for the month.
The jobs report comes at a critical time for the U.S. economy, and consequently for Fed policymakers.
Over the past year, the central bank has raised its benchmark interest rate eight times, taking the federal funds rate to a range of 4.5%-4.75%.
As inflation data appeared to cool toward the end of 2022, markets expected the Fed in turn to slow the pace of its rate hikes. That happened in February, when the Federal Open Market Committee approved a 0.25 percentage point increase and indi cated that smaller hikes would be the case going forward.
However, Fed Chairman Jerome Powell this week told Congress that recent metrics show inflation is back on the rise, and if that continues to be the case, he expects rates to increase to a higher lev el than previously expected. Powell specifically noted the “extremely tight” labor market as a reason why rates are likely to continue rising and stay elevated.
He also indicated that the increases could be higher than the February hike.
Though Powell emph asized that no decision has been made for the March FOMC meeting, markets recoiled at his comments. Stocks sold off sharply, and a gulf between 2- and 10-year Treasury yields widened, a phenomenon known as an inverted yield curve that has preceded all post-World War II recessions.
Lynwood Public Financing Authority - Page 22 of 22 Agenda Item # 3